Survey Says… — Inside Economics

PodcastInside EconomicsJohn LeerOct 16

The discussion links rising inflation to the Iran war and energy costs, while noting that core inflation has accelerated and that higher transportation and warehousing costs may increasingly pass through. Consumer sentiment is weak amid affordability concerns, job-loss anxiety, and geopolitical uncertainty, though the speakers see no acute sentiment shock and emphasize that survey methods and time horizons matter. The guest also weighs AI's productivity and business-creation potential against its inflationary pressures, while housing affordability and real earnings remain concerns for household spending.

Inflation Consumer Spending Energy Markets Investor Sentiment Artificial Intelligence Labor Market

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Key Takeaways

The guest links September’s 0.6% CPI increase and 9% rise in gasoline CPI to energy pressures from the Iran war, which they estimate added about one percentage point to headline inflation. Gasoline averaged roughly $4.35–$4.36 per gallon, and the speaker said October might bring only a modest decline at best; higher diesel-related transportation and warehousing costs could also be passed through.

Underlying inflation also showed persistence: core CPI rose 0.3% in both August and September, while September’s 3.7% CPI increase outpaced 3% wage growth, leaving real earnings down 0.7%. The guest says the weaker labor market makes a wage-price spillover less likely than in 2022, but does not rule it out; initial jobless claims, meanwhile, had not moved and remained at or below consensus.

The guest contrasts businesses’ earlier reluctance to pass through tariff costs—many absorbed them when tariffs seemed temporary—with current energy-related pressures, including diesel-driven transportation and warehousing costs that are increasingly likely to reach customers. The distinction in the discussion is that firms absorbed uncertain, potentially temporary tariff costs, whereas energy-related costs were showing signs of broader pass-through.

The guest sees AI as both a source of productivity and potential business creation: workers already using it broadly say it complements their work, and about 4% of the population report starting or considering a business because of AI’s lower setup costs. The guest cautions that worker responses may reflect selection bias, and argues that AI contributes roughly twice as much to growth as to inflation, so slowing it to curb inflation could also weaken growth below potential.

The guest identifies import-price increases in semiconductors, computers, and peripherals as a more direct signal of AI-related cost pressures than CPI or PPI, while noting that the affected goods are mainly enterprise purchases and consumer-price pass-through may be less direct. They also argue that interest rates alone do not establish whether policy is restrictive: real rates are not high by historical standards, financial conditions have not deterred major AI investment, and the scale of tightening needed to slow AI-related inflation remains uncertain.

GEO-POLITICS

War Expectations — The guest says Republicans' long-term economic expectations have deteriorated as the Iran war has continued. Survey respondents broadly expected the war to last roughly three months or less, unlike the tariff war, when Republicans hoped for a net positive economic effect.

“The more recent development is that, you know, not to conflate maybe economics and politics, but Republicans have turned pretty negative now over the last two or three months…”—

TECHNOLOGY

AI At Work — Among people already using AI at work, the guest says workers generally see it as complementary to their jobs and report doing more and becoming more productive. The guest cautions that this positive view may reflect selection bias, since these workers opted into AI use.

“You know, these are people who have opted in broadly to using AI already, but we really see people who are using AI in the workplace as by and large…”—

ECONOMY

Energy Inflation — U.S. CPI rose 0.6% in September, above expectations, lifting year-over-year inflation from 3.4% to 3.7%, nearly 3.8%. Gasoline CPI rose 9% month over month; the guest links the hotter headline reading to energy prices.

“The US Consumer Price Index rose point 6%. That was... That's a very strong increase. It's... It was expected to be on the high side because of energy prices…”—

Grocery Prices — Food-at-home CPI fell 0.1% in September, and grocery inflation had been mild in recent months. The guest says consumers walking away from grocery prices or trading down are limiting grocers' ability to pass through higher costs.

“So, food inflation, point 1% decline. Food at home... CPI for food at home, that's our proxy proxy for grocery prices. That's a positive story…”—

Core Inflation — Core CPI rose 0.3% in both August and September. The guest interprets the consecutive monthly increases as an acceleration in the underlying inflation trend.

“We knew we were gonna get a strong increase because of gas prices. We know what's what's happening in energy markets…”—

MARKETS

Earnings Outlook — The host says businesses are making substantial money in aggregate, particularly technology companies. Upcoming earnings reports from bellwether companies could provide a broad read on business performance.

“But there's a lot of earnings. You know, that's another big…”—

FORECASTS

Gasoline Outlook — Gasoline CPI rose 9% in September, with unleaded gasoline averaging about $4.35–$4.36 per gallon, roughly 30 cents above the prior month. The speaker says October might bring a modest decline at best, while noting that relief was not evident in September.

“Underneath the hood, energy, as expected, 9% increase on the month in gasoline, the CPI for gasoline, we're about four thirty six, four thirty five average throughout September for gallon…”—

Inside Economics Introductions

The hosts welcome their guests, exchange light personal banter, and introduce John Leer as Morning Consult’s chief economist.

September Inflation Report

CPI rose sharply as energy costs surged, while grocery prices unexpectedly declined and core inflation also accelerated.

Iran War Inflation Pass-Through

The speakers attribute much of the inflation increase to the Iran war and energy costs, with transportation and warehousing creating emerging second-order pressures.

Inflation Persistence Risks

Tariff uncertainty had eased before the war, but the guest warns that prolonged inflation could eventually feed into wages and expectations, though that transmission is not yet evident.

Fed Rates And Financial Conditions

The guest argues rates may not be restrictive when judged against real rates and investment activity, while housing affordability presents a separate challenge.

AI Investment And Inflation

AI infrastructure is pushing up import and capital-goods prices, but its effects on consumer prices are less direct than energy or tariff shocks.

Consumer Sentiment Weakens

Affordability concerns, elevated fuel prices, job-loss anxiety, geopolitical uncertainty, and housing costs are weighing on consumer confidence.

Morning Consult Survey Methods

Leer contrasts Morning Consult’s daily online survey with other confidence measures, emphasizing differences in frequency, questionnaire focus, and time horizons.

Sentiment And Household Spending

Sentiment alone is not a direct spending proxy; combining willingness to spend with employment and household financial capacity offers a stronger read.

Regional And Political Divide

Consumer sentiment varies widely by region and industry, while the Iran war has recently weakened Republican outlooks and amplified affordability concerns.

Midterm Election And Data Centers

The guest sees economic dissatisfaction weighing on Republican candidates and notes bipartisan concern about data centers alongside housing and affordability priorities.

AI Growth And Fed Trade-Offs

The hosts weigh AI’s contribution to economic growth against its inflationary effects and discuss the risk that tighter policy could disproportionately hurt non-AI sectors.

Housing Affordability And Inflation

Consumers experience price changes differently, and would-be homebuyers who remain renters may feel financially discouraged while retaining savings that support spending.

Inflation And Housing Statistics

In the stats game, the group identifies falling baby-food prices, rising existing-home sales, and declining real earnings as notable economic measures.

Existing Sales And Real Earnings

The guests discuss housing as a long-term economic drag and highlight negative real earnings as a pressure on household budgets and consumer sentiment.

AI Optimism And Productivity

Workers using AI often report productivity gains, and the guest sees potential for business creation even as the hosts stress the need for safeguards.

Economic Data To Watch

The panel previews political polling, Middle East developments, consumer sentiment surveys, jobless claims, and corporate earnings before thanking the guest.